Employers’ Liability Insurance for One Employee

Yes. If your business employs one person who is normally based in England, Scotland or Wales, you must hold employers’ liability insurance of at least £5 million from an authorised insurer, unless an exemption applies. The main exemptions for small businesses are employing only close family in a business that is not a limited company, and a company whose only employee is its owner holding 50% or more of the shares.

Does the law apply if I only have one employee?

Yes. The duty comes from the Employers’ Liability (Compulsory Insurance) Act 1969, which requires employers to insure against their liability for injury to their employees. GOV.UK says you need employers’ liability insurance as soon as you become an employer. There is no lower threshold based on headcount, so the first employee brings the duty with them.

The policy pays compensation if an employee is injured or becomes ill because of their work, and HSE notes this applies whether the injury happens on or off site. Public liability does not do this job, because it covers claims from the public and other businesses rather than from your staff. Our page on whether public liability insurance covers employees explains the gap.

Who counts as an employee?

Section 2 of the 1969 Act defines an employee as someone who has entered into or works under a contract of service or apprenticeship with you, whether the contract is express or implied, oral or in writing. Hours are not part of that test, so a part time assistant or an apprentice counts.

HSE says it does not matter whether you call someone an employee or self employed; what counts is the real relationship. Deducting income tax and National Insurance, and controlling where, when and how someone works, point towards employment. Someone who works for other clients as an independent contractor and supplies most of their own equipment and materials points the other way.

Domestic staff are a separate case. HSE says you will probably not need employers’ liability insurance for people such as cleaners or gardeners who work for more than one person, but if someone works only for you, you may be required to insure.

Which exemptions might apply to a small business?

• Close family. GOV.UK says you do not need employers’ liability if you only employ a family member. The Act lists the relatives covered: husband, wife, civil partner, father, mother, grandparents, stepparents, children, grandchildren, stepchildren, brothers and sisters, including half brothers and half sisters. HSE makes clear this exemption does not apply to family businesses incorporated as limited companies.
• Owner only companies. HSE lists companies employing only their owner, where that employee also owns 50% or more of the issued share capital.
• Staff based outside Great Britain. GOV.UK says you do not need it if you only employ someone based outside England, Scotland and Wales.
• Public bodies. Most public organisations, including government departments and local authorities, are exempt, which rarely helps a private business.

Our page on employers’ liability insurance requirements sets out the wider rules.

I run a one person limited company. What happens when I hire someone?

While you are the only employee and you own 50% or more of the issued shares, HSE’s guidance says the company is exempt. That exemption is described as covering companies employing only their owner. The day you put a second person on the payroll, even for a few hours a week, the company is no longer employing only its owner and needs cover from that first day.

The family exemption does not rescue a limited company either. If your company employs your son or your wife, HSE’s guidance means cover is still required, because the family exemption does not extend to incorporated businesses. If you are a sole director, see also Employment Allowance for a sole director company, as the first hire can change your payroll position too.

What does the £5 million minimum mean?

Regulation 3 of the Employers’ Liability (Compulsory Insurance) Regulations 1998 sets the minimum at not less than £5 million for claims relating to one or more employees arising out of any one occurrence, and that figure includes the costs and expenses of the claim. Where a company has subsidiaries, the regulation treats the company and its subsidiaries as a single employer for this purpose.

HSE notes that in practice most insurers offer cover of at least £10 million. Public sector buyers also check it: the standard selection questions in Procurement Policy Note 03/24 ask bidders to confirm their employer’s liability cover and note the £5 million legal minimum.

What are the certificate rules?

Your insurer issues a certificate of employers’ liability insurance. HSE says you must display a copy where your employees can easily read it. Since 1 October 2008 you have been allowed to display it electronically, as long as employees know where to find it and can access it. HSE inspectors can check that you have cover of at least £5 million with an approved insurer and may ask to see your certificate.

There is no legal requirement to keep out of date certificates, but HSE recommends keeping a full record because some diseases appear decades after exposure. A former employee who needs to trace an old policy can use the Employers’ Liability Tracing Office.

What are the fines for not having cover?

GOV.UK says you can be fined £2,500 for every day you are not properly insured, and £1,000 if you do not display your certificate. Section 5 of the 1969 Act makes it an offence for each day the employer is not insured, punishable by a fine up to level 4 on the standard scale. Where a company commits the offence with the consent or connivance of, or through neglect by, a director, manager, secretary or other officer, that person is also guilty. Fines are only part of the risk: without insurance, an injured employee’s compensation claim falls on the business itself.

Situation	Employers’ liability needed?	Source of the rule
Sole trader employing one person who is not family	Yes, at least £5 million	1969 Act and GOV.UK
Sole trader or partnership employing only close family	No	1969 Act section 2 and GOV.UK
Limited company employing a family member	Yes	HSE guidance
Company whose only employee is the owner with 50% or more of the shares	No	HSE guidance
Only employee based outside England, Scotland and Wales	No	GOV.UK
Not insured when required	Fine of £2,500 for each day	GOV.UK
Certificate not displayed	Fine of £1,000	GOV.UK

Example. Tom runs a surveying company. He is the sole director, owns all the shares and is the only person on the payroll, so on HSE’s guidance the company is exempt. He then hires a part time administrator for two days a week. From her first day the company needs employers’ liability insurance of at least £5 million from an authorised insurer, and Tom saves the certificate to the shared drive and tells her where to find it.

Frequently asked questions

Do I need employers’ liability for a part time or temporary employee?

Yes, unless an exemption applies. The Act looks at whether there is a contract of service or apprenticeship, not at the hours worked or how long the job lasts.

Do I need it if I only employ my daughter?

Not if you trade as a sole trader or partnership, because a child is one of the close relatives listed in the Act. If your business is a limited company, HSE says the family exemption does not apply, so you need cover.

Can the insurer make me repay a claim?

HSE says that if you failed to meet your health and safety duties and that led to the claim, the policy may let the insurer sue you to recover the compensation. The insurer cannot make you or the employee pay part of a claim as a condition of the policy, although you can agree an arrangement with the insurer.

Is employers’ liability sold with public liability?

The two can be arranged together on one policy; see public and employers’ liability insurance and public liability insurance for sole traders. Ask us for a quote on 01795 841 310, Monday to Friday 9am to 5pm, or through our business insurance quote page, and we will look for cover in place from your first employee’s start date.

See also: Employee liability insurance: what it really means.

Sources

• legislation.gov.uk: Contents
• GOV.UK: Employers liability insurance
• legislation.gov.uk: 2
• legislation.gov.uk: 5
• legislation.gov.uk: 3
• HSE: Hse40
• GOV.UK: Annex b standard selection questions html

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 November 2026. Solar Protect is the trading name of Solar Insurance Services (Medway) Limited, authorised and regulated by the Financial Conduct Authority. This page is general information, not personal advice.